Friday, May 8

It is sometimes Smart for US Companies to Make Goods Overseas

It is sometimes smart for US Companies to Make Goods Overseas.

In this morning's Washington Post comes word that General Motors plans to shift more manufacturing overseas.

The U.S. government is pouring billions into General Motors in hopes of reviving the domestic economy, but when the automaker completes its restructuring plan, many of the company's new jobs will be filled by workers overseas.

According to an outline the company has been sharing privately with Washington legislators, the number of cars that GM sells in the United States and builds in Mexico, China and South Korea will roughly double. - Washington Post

It kind of makes sense since the company has been unprofitable to the point of bankrupting itself. The only way it is going to get out of this hole is to decrease costs to the point that they can earn a profit on the products they sell. They have been unable to do this, which has required Billions from the US Government just to keep the company operating.

Then there is this:

"The bottom line is GM would rather pay $2 an hour -- and it's a slippery slope downward," said Alan Reuther, the UAW's legislative director. "If GM is going to be getting government assistance, they ought to be maintaining their manufacturing footprint in the U.S. rather than going off to China, Mexico and South Korea."

Labor costs in those countries are far lower. While paying a U.S. autoworker with benefits costs about $54 an hour, a South Korean worker earns about $22 an hour, a Mexican worker earns less than $10 an hour and some Chinese workers can earn as little as $3 an hour, industry sources said. - Washington Post

How is a Mexican or Chinese worker ever going to be able to afford a car made in the US when their hourly wage is much lower than the hourly wage paid to the people who make the car? (Forget even trying to make a profit from these people.) This comparatively high cost is why American cars are often seen as 'luxury' cars in the third-world. Now the smart move for GM would be to shift some manufacturing to these low cost countries so that they can produce cars for sale in these low cost countries. And if in the end it reduces the cost of cars made here in the US (due to cheaper parts or whatever) then all the better. Since these locations are going to best afford the smaller and cheaper models, it only makes sense that those models also be 'exported' to the US, instead of duplicating the manufacturing effort here to make the same exact product.

And remember foreign workers are not all that bad, especially considering that every offshore-d job keeps one foreigner from becoming an illegal alien inside the US. And that means that US Corporations employing workers outside the US are doing more to fight illegal immigration than the US Government itself. (since the US Government is bringing Social Issues into this, then so can the rest of us.)